On November 12, 2021 the European Commission published the key decisions regarding its October infringements package. The key decisions regarding the Taxation and Customs Union include a.o.:
· Letters of formal notice sent to Denmark, Croatia and Lithuania in which the Commission calls on Denmark, Croatia and Lithuania to explain how they transposed the VAT e-commerce package into national law; and
· A letter of formal notice sent to Spain in which the Commission request Spain to allow the deduction of directly related expenses when calculating withholding tax on cross-border royalty payments.
The European Commission calls on Denmark, Croatia and Lithuania to explain how they transposed the VAT e-commerce package into national law
The Commission has decided to open infringement proceedings against Denmark, Croatia and Lithuania for non-communication of the explanatory documents in relation to the transposition of new EU-wide rules for VAT on e-commerce (Council Directives (EU) 2017/2455 in the cases of both Denmark and Lithuania, and (EU) 2019/1995 in the cases of both Denmark and Croatia). The new rules are intended to simplify VAT for companies and consumers involved in cross-border online sales within the EU and to create a fairer environment for EU sellers by removing the VAT exemption for low-value imports from outside the European Union. In line with Court of Justice case law, Member States must indicate in a sufficiently clear and precise manner the national measures by which they transposed obligations imposed by an EU Directive. Since Denmark, Croatia and Lithuania have failed to provide clear explanations on the way they have transposed these directives, the Commission cannot check that these Member States have completely and correctly transposed the relevant provisions into national law. Denmark, Croatia and Lithuania now have two months to act. Otherwise, the Commission may decide to send reasoned opinions.
Commission requests Spain to allow the deduction of directly related expenses when calculating withholding tax on cross-border royalty payments
The Commission has decided to open infringement proceedings against Spain, requesting it to align its rules on withholding taxes charged on royalty payments received by non-resident taxpayers (Article 56 TFEU). The Spanish rules provide that the withholding tax is levied on the gross amount of income, without the possibility to deduct directly related expenses. While case law of the Court of Justice of the European Union allows a Member State to charge a withholding tax on cross-border royalty payments even if it does not levy withholding taxes on purely domestic payments, it must allow the deduction of directly related expenses when determining the tax due. Spain has two months to reply to the arguments raised by the Commission after which the Commission may decide to send a reasoned opinion.
Click here to be forwarded to the key decisions of the European Commission’s October infringements package as published by the European Commission on November 12, 2021.
Copyright – internationaltaxplaza.info